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# T. S. Grewal Solution for Class 12 Commerce Accountancy Chapter 10 - Company Accounts - Redemption of Debentures

Exercise/Page

## T. S. Grewal Solution for Class 12 Commerce Accountancy Chapter 10 - Company Accounts - Redemption of Debentures Page/Excercise 10.29

Solution Ex.1

Amount required to be transferred to DRR = 25% of the Face value of Debentures

= 25% of Rs 25, 00,000 = Rs 6,25,0000

Solution Ex.2

(a) As the debentures are fully convertible, there is no need for creation of Debenture Redemption Reserve.

(b) For the non- convertible part of debentures, DRR would be created as follows:

Amount required to be transferred to DRR (25% of Face Value) = 20, 00,000 × 25% = 1, 25,000

Solution Ex.3

As per Section 71 (4) of the Companies Act, 2013, an amount equal to at least 25% of the value of debentures is to be transferred to the Debenture Redemption Reserve Account.

Thus, the amount to be transferred to Debenture Redemption Reserve A/c would be 2,00,000 × 25% = Rs.50,000.

Solution Ex.4

As per Section 71 (4) of the Companies Act, 2013, an amount equal to at least 25% of the value of debentures is to be transferred to the Debenture Redemption Reserve Account.

Thus, the amount to be transferred to Debenture Redemption Reserve A/c would be 10,00,000 × 25% = Rs.2,50,000

Further, as per Rule 18 (7) every company required to create Debenture Redemption Reserve is to invest an amount at least equal to 15% of the value of debentures in specified securities.

Thus, amount transferred to Debenture Redemption Investment A/c would be 10,00,000 × 15% = Rs.1,50,000.

 Journal In the Books of Nirbhai Chemicals Ltd. Date Particulars L.F. Debit  Rs. Credit  Rs. 2017 10,80,000 30th June Bank A/c Dr. 10,00,000 -------To 6% Debenture A/c 80,000 -------To Securities Premium Reserve A/c (Being debenture issued) 2018 31st Mar Statement of Profit and Loss A/c Dr. 2,50,000 -------To Debenture Redemption Reserve A/c 2,50,000 (Being DRR created) 30th April Debenture Redemption Investment A/c Dr. 1,50,000 -------To Bank A/c 1,50,000 (Being investment made in specified securities) 30th June Bank A/c Dr. 1,50,000 -------To Debenture Redemption Investment A/c 1,50,000 (Being investment enchased) 30th June 6% Debenture A/c Dr. 10,00,000 -------To Debenture holders' A/c 10,00,000 (Being amount due on 6% debenture) 30th June Debenture holders' A/c Dr. 10,00,000 -------To Bank A/c 10,00,000 (Being payment made on redemption) 30th June Debenture Redemption Reserve A/c Dr. 2,50,000 -------To General Reserve A/c 2,50,000 (Being transfer of debenture redemption reserve to general reserve)

Note:

As the question was silent, so the entries for interest on debentures have been ignored. The students' may Journalize the entries related to interest on debentures as given below.

 Journal Date Particulars L.F. Debit  Rs. Credit  Rs. 2018 31st Mar Debenture Interest A/c Dr. 45,000 -------To Debenture holders' A/c 45,000 (Being interest on 6% debenture due for 9 months) 31st Mar Debenture holders' A/c Dr. 45,000 -------To Bank A/c 45,000 (Being payment of interest to debenture holders) 31st Mar Statement of Profit and Loss A/c Dr. 45,000 -------To Debenture Interest A/c 45,000 ( Being transfer of debenture interest to statement of profit and loss)

Solution Ex.5

Banking Companies have been exempted to invest in specified securities as per the Companies Act, 2013.

Solution Ex.6

 Year ended on Date of Investment Redeemable Amount Minimum amount of DRI 31st March 2017 On or before 30th April 2016 20,00,000 × 15%  = 3,00,000 3,00,000 × 15% =45,000 31st March 2018 On or before 30th April 2017 20,00,000 × 25%  = 5,00,000 5,00,000 × 15% = 75,000 31st March 2019 On or before 30th April 2018 20,00,000 × 15%  = 3,00,000 3,00,000 × 15% = 45,000 31st March 2020 On or before 30th April 2019 20,00,000 × 25%  = 5,00,000 5,00,000 × 15%  = 75,000 31st March 2021 On or before 30th April 2020 20,00,000 × 20% = 4,00,000 4,00,000 × 15%  = 60,000

## T. S. Grewal Solution for Class 12 Commerce Accountancy Chapter 10 - Company Accounts - Redemption of Debentures Page/Excercise 10.30

Solution Ex.7

 In the books of IFCI Limited Journal Date Particulars L.F. Debit  Rs. Credit  Rs. 2011 1st April Bank A/c Dr. 5,00,00,000 -------To 9% Debenture Application A/c 5,00,00,000 (Being debenture Application money received) 1st April 9% Debenture Application A/c Dr. 5,00,00,000 -------To 9% Debenture A/c 5,00,00,000 (Being debenture application money transferred to debenture account) 2017 1st April 9%Debenture A/c Dr. 5,00,00,000 -------To Debenture holders' A/c 5,00,00,000 (Being debentures due for redemption) 1st April Debenture holders' A/c Dr. 5,00,00,000 -------To Bank A/c 5,00,00,000 (Being amount due for redemption paid to debenture holders)

Notes:

1. No DRR is to be created for All India Financial Institutions.

2. Entries for interest on debentures have been ignored in the above solution as the question was silent in this regards. However, the entries related to interest on debentures every year from April 01, 2011 to March 31, 2017 can be recorded as provided below.

 Journal Date Particulars L.F. Debit  Rs. Credit  Rs. 2011 31st Mar Debenture Interest A/c Dr. 45,00,000 -------To Debenture holders A/c 45,00,000 (Being interest on 9% debentures due) 31st Mar Debenture holders' A/c Dr. 45,00,000 -------To Bank A/c 45,00,000 (Being payment of interest to debenture holders') 31st Mar Statement of Profit and Loss A/c Dr. 45,00,000 -------To Debenture Interest A/c 45,00,000 (Being transfer of debenture interest to Statement of Profit and Loss)

Solution Ex.8

 Journal Date Particulars L.F. Debit  Rs. Credit  Rs. 2002 31st Mar Statement of Profit and Loss A/c Dr. 60,000 -------To Debenture Redemption Reserve A/c 60,000 (Being surplus amount is transferred to DRR) 30th April Debenture Redemption Investment A/c Dr. 1,.20,000 -------To Bank A/c 1,20,000 (Being investment is made in specified securities equal to 15% of the value of debenture redeemed) 2003 31st Mar 9% Debenture A/c Dr. 8,00,000 -------To Debenture holders' A/c 8,00,000 (Being debenture due for redemption) 31st Mar Bank A/c Dr. 1,20,000 -------To Debenture Redemption Investment A/c 1,20,000 (Being investment made in specified securities is now encased) 31st Mar Debenture holders' A/c Dr. 8,00,000 -------To Bank A/c 8,00,000 (Being amount paid to debenture holders) 31st Mar Debenture Redemption Reserve A/c Dr. 2,00,000 -------To General Reserve A/c 2,00,000 (Being DRR transferred to general reserve)

Working Notes:

Notes:

1. No interest has been calculated on Investments as rate of interest is not provided.

2. Entries for interest on debentures have been ignore, however, the entries have been provided for reference.

 Journal Date Particulars L.F. Debit  Rs. Credit  Rs. 2002 31st Mar Debenture Interest A/c Dr. 72,000 -------To Debenture holder' A/c 72,000 (Being interest on 9% debenture due) 31st Mar Debenture holder' A/c Dr. 72,000 -------To Bank A/c 72,000 (Being payment of interest to debenture holders') 31st Mar Statement of Profit and Loss A/c Dr. 72,000 -------To Debenture Interest A/c 72,000 (Being transfer of debenture interest to statement of profit and loss)

Solution Ex.9

 Books Of W Ltd. Journal Date Particulars L.F. Debit  Rs. Credit  Rs. 2016 Mar.31 Statement of Profit and Loss A/c Dr. 1,00,000 -------To Debenture Redemption Reserve A/c 1,00,000 (Being surplus transferred to debenture redemption reserve) Apr.30 Debenture Redemption Investment A/c Dr. 45,000 -------To Bank A/c 45,000 (Being investment is made in specified securities equal to 15% of the value of debenture redeemed) 2017 Mar.31 9% Debenture A/c Dr. 3,00,000 -------To Debenture holders' A/c 3,00,000 (Being debenture due for redemption) Mar.31 Bank A/c Dr. 45,000 -------To Debenture Redemption Investment A/c 45,000 (Being investment made in specified is now encased) Mar.31 Debenture holders A/c Dr. 3,00,000 -------To Bank A/c 3,00,000 (Being amount due to debenture holders Paid) Debenture Redemption Reserves A/c 75,000 -------To General Reserves A/c 75,000 (50% Debenture Redemption Reserves transferred to General Reserves A/c)

Working Note:

Note:

1. Here, the entry for transferring the amount of DRR to General Reserve has been passed with 50% of DRR amount, since the company has not fully redeemed all its debentures. Therefore, 50% of DRR amount i.e. 50% of 1,50,000, has been transferred to General Reserve.

2. As the question was silent, entries for interest on debentures have been ignored. However, these have been provided for reference.

 Journal Date Particulars L.F. Debit  Rs. Credit  Rs. 2017 31st Mar Debenture Interest A/c Dr. 33,750 -------To Debenture holder A/c 33,750 (Being interest on 9% debenture due for 12 month) 31st Mar Debenture holders' A/c Dr. 33,750 -------To Bank A/c 33,750 (Being payment of interest to debenture holders') 31st Mar Statement of Profit and Loss A/c Dr. 33,750 -------To Debenture Interest A/c 33,750 (Being transfer of debenture interest to statement of profit and loss)

Solution Ex.10

 Journal Date Particulars L.F. Debit  Rs. Credit  Rs. Statement of profit or Loss A/c Dr. 1,20,000 -------To Debenture Redemption Reserve A/c 1,20,000 (Being surplus amount is transferred to debenture redemption reserve) Debenture Redemption Investment A/c Dr. 18,000 -------To Bank A/c 18,000 (Being investment is made in specified securities equal to15% of the value of debenture redeemed) Debentures A/c Dr. 1,20,000 Premium on Redemption of Debenture A/c Dr. 6,000 -------To Debenture holders' A/c 1,26,000 (Being debenture due for redemption along with Premium) Bank A/c Dr. 18,000 -------To Debenture Redemption Investment A/c 18,000 (Being investment made in specified securities is now encased) Debenture holders' A/c Dr. 1,26,000 -------To Bank A/c 1,26,000 (Being payment made to debenture holders) Debenture Redemption Reserve A/c Dr. 1,20,000 -------To General Reserve A/c 1,20,000 (Being debenture redemption reserve transferred to capital reserve)

In case of redemption of debentures by profits, 100% of the nominal value of debentures is transferred to Debenture Redemption Reserve A/c.

Solution Ex.11

 Journal Date Particulars L.F. Debit  Rs. Credit  Rs. 2016 31st Mar Statement of Profit and Loss A/c Dr. 6,00,000 -------To Debenture Redemption Reserve A/c 6,00,000 (Being surplus amount is transferred to debenture redemption reserve) 30th April Debenture Redemption Investment A/c Dr. 90,000 -------To Bank A/c 90,000 (Being investment is made in specified equal to 15% of the value of debenture redeemed) 2017 31st Mar 10% Debenture A/c Dr. 6,00,000 -------To Debenture holders A/c 6,00,000 (Being debenture due for redemption) 31st Mar Bank A/c Dr. 90,000 -------To Debenture Redemption Investment A/c 90,000 (Being investment made in securities, now encased) 31st Mar Debenture holders' A/c Dr. 6,00,000 -------To Bank A/c 6,00,000 (Being payment made to debenture holders) 31st Mar Debenture Redemption Reserve A/c Dr. 6,00,000 -------To General Reserve A/c 6,00,000 (Being debenture redemption reserve transferred to general reserve)

In case of redemption of debentures by profits, 100% of the nominal value of debentures is transferred to DRR A/c.

Note:

As the question was silent, entries for interest on debentures have been ignored. However, these have been provided for reference.

 Journal Date Particulars L.F. Debit  Rs. Credit  Rs. 2017 31st Mar Debenture Interest A/c Dr. 60,000 -------To Debenture Holders A/c 60,000 (Being interest on 10% debenture due) 31st Mar Debenture Holders A/c Dr. 60,000 -------To Bank A/c 60,000 (Being payment of interest to debenture holders) 31st Mar Statement of Profit and Loss A/c Dr. 60,000 -------To Debenture Interest A/c 60,000 (Being payment of interest to debenture holders')

Solution Ex.12

 Books of India Textiles Corporation Ltd Journal Date Particulars L.F. Debit  Rs. Credit  Rs. 2017 31st Mar Statement of Profit and Loss A/c Dr. 9,50,000 -------To Debenture Redemption to Debenture A/c 9,50,000 (Being profit transferred to debenture redemption reserve) 30th April Debenture Redemption Investment A/c Dr. 7,50,000 -------To Bank A/c 7,50,000 (Being investment is made in specified equal to 15% of the value of debenture redeemed) 2017 31st July 9% Debenture A/c Dr. 50,00,000 -------To Debenture holders A/c 50,00,000 (Being debenture due for redemption) 31st July Bank A/c Dr. 7,50,000 -------To Debenture Redemption Investment A/c 7,50,000 (Being investment made in securities, now encased) 31st July Debenture holders A/c Dr. 50,00,000 -------To Bank A/c 50,00,000 (Being payment made to debenture holders) 31st July Debenture Redemption Reserve A/c Dr. 12,50,000 -------To General Reserve A/c 12,50,000 (Being debenture redemption reserve transferred to general reserve)

Working Notes:

1.

Calculation of amount transferred to Debenture Redemption Reserve Account

2.

Calculation of amount invested in Specified Securities

Note:

As the question was silent, entries for interest on debentures have been ignored. However, these have been provided for reference.

 Journal Date Particulars L.F. Debit  Rs. Credit  Rs. 2017 31st Mar Debenture Interest A/c Dr. 4,50,000 -------To Debenture Holders A/c 4,50,000 (Being interest on 9% debenture due) 31st Mar Debenture holders A/c Dr. 4,50,000 -------To Bank A/c 4,50,000 (Being payment of interest debenture holders) 31st Mar Statement of Profit and Loss A/c Dr. 4,50,000 -------To Debenture Interest A/c 4,50,000 (Being transfer of debenture interest to statement of profit and loss)

Solution Ex.13

 Books of Manish Ltd. Journal Date Particulars L.F. Debit  Rs. Credit  Rs. 2016 1st April Bank A/c Dr. 40,00,000 -------To Debenture Application A/c 40,00,000 (Being debenture application money received) Debenture Application A/c Dr. 40,00,000 Loss on Issue of Debenture A/c Dr. 2,00,000 -------To 8% Debenture A/c 40,00,000 -------To Premium on Redemption of Debenture A/c 2,00,000 (Being debenture issued with the term repayable at 5% Premium) 2017 31st Mar Statement of Profit and Loss A/c (Note 1) Dr. 10,00,000 -------To Debenture Redemption Reserve A/c 10,00,000 (Being Surplus amount is transferred to debenture redemption Reserve) 2018 31st Mar Statement of Profit and Loss A/c (Note 1) Dr. 10,00,000 -------To Debenture Redemption Reserve A/c 10,00,000 (Being surplus amount is transferred to debenture redemption Reserve) 30th April Debenture Redemption investment A/c (Note 2) Dr. 6,00,000 -------To Bank A/c 6,00,000 (Being investment is made in specified securities equal to 15% of the value of debenture redeemed) 31st Mar 8% Debenture A/c Dr. 40,00,000 Premium on Redemption of Debenture A/c Dr. 2,00,000 -------To Debenture holders A/c 42,00,000 (Being debenture due to redemption along with premium) 30th June Bank A/c Dr. 6,00,000 -------To Debenture Redemption Investment A/c 6,00,000 (Being investment made in securities, now encased) 30th June Debenture holders A/c Dr. 42,00,000 -------To Bank A/c 42,00,000 (Being amount paid to debenture holders) 30th June Debenture Redemption Reserve A/c Dr. 20,00,000 -------To General Reserve A/c 20,00,000 (Being debenture redemption reserve transferred to general reserve)

Note:

1. As per Section 71(4) of the Companies Act, 2013, companies are required to create DRR at 25% of the total value of debentures. However, it is the discretion of the company to transfer more amounts to DRR than the prescribed amount of 25%. In this case, as explicitly specified about company's discretion for creation of DRR of a total amounting to Rs.20,00,000 which is 50% of the total value of redeemable debentures is allowed.

2. As explicitly stated in the question, entries for interest on debentures have been ignored.

## T. S. Grewal Solution for Class 12 Commerce Accountancy Chapter 10 - Company Accounts - Redemption of Debentures Page/Excercise 10.31

Solution Ex.14

 Journal In the Books of Godrej Ltd. Date Particulars L.F. Debit  Rs. Credit  Rs. 2016 Apr.01 Debenture Redemption Investment A/c Dr. 3,00,000 -------To Bank A/c 3,00,000 (Being investment is made in specified securities) 2017 Mar.31 Bank A/c Dr. 3,16,200 Tax Payable A/c Dr. 1,800 -------To Interest on Debenture Redemption Investment A/c 18,000 -------To Debenture Redemption Investment A/c 3,00,000 (Being investment encased and interest received) Mar.31 Statement of Profit and Loss A/c Dr. 1,50,000 -------To Debenture Redemption Reserve A/c 1,50,000 (Being Debenture Redemption Reserve created) 31st Aug 7% Debenture A/c Dr. 20,00,000 -------To Debenture holders A/c 20,00,000 (Being amount due o 7% Debenture) 31st Aug Debenture holders A/c Dr. 20,00,000 -------To Bank A/c 20,00,000 (Being payment made on redemption on Debenture) 31st Aug Debenture Redemption Reserve A/c Dr. 5,00,000 -------To General Reserve A/c 5,00,000 (Being debenture redemption reserve transferred to general reserve)

Working Notes:

WN 1: Calculation of amount transferred to DRR)

Note:

In order to maintain consistency with the guidelines issued by Ministry of Corporate Affairs, the year of transfer to DRR and investment has been assumed to be in 2014 because guidelines say that every company is required to create/maintain DRR shall on or before the 30th day of April of each year, deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the amount of its debentures maturing during the year ending on the 31st day of March next following year.

Accordingly, entries for DRR and investment if passed in any of the year then redemption would take place in the following year.

Solution Ex.16

 In the books of JB Limited Journal Date Particulars L.F. Debit  Rs. Credit  Rs. 2014 1st April Bank A/c Dr. 10,40,000 -------To 6% Debenture Application A/c 10,40,000 (Being debenture application money received) 1st April 6% Debenture application A/c Dr. 10,40,000 Loss on Issue of Debenture A/c Dr. 50,000 -------To 6% Debenture A/c 10,00,000 -------To  Securities Premium A/c 40,000 -------To Premium on Redemption A/c 50,000 (Being  debentures of Rs.10,00,000 issued 4% premium with the term redeemable at 5% premium) 2017 31st Mar Statement of Profit and Loss A/c Dr. 2,50,000 -------To Debenture Redemption Reserve A/c 2,50,000 (Being surplus amount is transferred to debenture redemption reserve)